While the Covid-19 pandemic has sparked serious economic hurdles, this worldwide health crisis may have brought just the right time for some to buy a home.
The Bank of Mauritius (BoM), like most central banks across the globe, has sharply reduced its interest rates as part of the country’s economic measures to cushion the adverse impact of the Covid-19 pandemic. On April 16, 2020, the BoM’s Monetary Policy Committee unanimously approved to reduce the bank’s Key Repo Rate (KRR) by 100 basis points to 1.85 per cent per annum from the previous 2.85 per cent KRR.
This cut, primarily aimed at boosting bank lending to businesses and consumers, amongst other things, translates in lower mortgage rates charged to home loan borrowers. All prime lending rates of Mauritian commercial banks are linked to the BoM’s KRR.
Besides the prospect of better credit terms, the stellar record of Mauritius in combating Covid-19 gives the country an edge amongst choices of foreign home buyers. Considered as one of Africa’s success stories in containing Covid-19, Mauritius has recently been recognised by World Travel and Tourism Council as a safe destination. The country has also lifted its lockdown effective June 2020 after its health department’s day-to-day tracking had recorded zero Covid-19 new cases.
In this time of Covid-19, Mauritius looms as a refuge of foreign home buyers.
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Borrowing wisely pays
An aspiring buyer home in Mauritius may apply for a mortgage in Mauritian rupees or any hard currency. With the wide fluctuation in foreign exchange rates because of Covid-19, it would be smart for borrowers to secure a home loan in the currency of their cash inflow.
This way, the borrowers avoid unnecessary exposure to currency risks. The servicing of their loan would be on the same currency as the income that they generate or receive, like salary and dividends.
It is important to note though for non-Mauritian citizens that if they contract a loan in Mauritian rupees for a property purchase under any property scheme (such as the Property Development Scheme or PDS) open to foreigners the first USD500,000 should be paid in foreign currency. The repayment of the loan should also be in foreign currency.
Tap local commercial banks
For ex-pats or foreigners planning to buy a home via a mortgage, the financing is best obtained from local commercial banks rather than from banks in their countries of origin.
It is more likely that Mauritius-based banks to take as loan guarantees the borrowers’ residential units being purchased under the government’s property schemes. This is especially so if the foreign buyers are acquiring a residence under VEFA that provides a guarantee for the completion of the property.
Tapping quality real estate developers such as 2Futures would also be wise for foreigners planning to buy a home and have a shot at the best mortgage terms available. Developers like 2Futures, top-ranked in Mauritius luxury real estate, maintain superb professional working relationships with banks. Such close ties bring the borrowers within the lending banks’ comfort zone, knowing the guaranteed high quality of the property up for a mortgage.
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